San Francisco Fed Study Examines CU Mergers

Credit union mergers are producing greater cost efficiencies. And in cases where the acquiring CU is much larger than the target institution, members of the target CU benefit from lower loan rates and higher deposit rates, according to a new study issued by the Federal Reserve Bank of San Francisco.

The report, which reviewed 9,412 CU mergers from 1984 to 2009, concluded that acquiring CUs are now gaining slightly higher cost advantages than in the past when mergers tended to focus on the targeted CUs.

Comparing stock-held banks and member-owned credit unions, the authors noted that bank consolidations are conducted to reduce expenses and raise net earnings, but by contrast, a credit union might use merger-related cost savings to offer its members lower loan rates.